South Australian businesses launch blockchain app to cut costs, trade local clean energy

A group of companies in South Australia, home to kangaroos, vineyards and high electricity prices, hope to cut costs and use more clean energy by trading power on a blockchain platform.

A group of small and medium-size South Australian businesses plan to launch a first-of-its-kind power trading platform using blockchain technology in an attempt to save money and buy and sell local clean energy.

Blockchain-based microgrid developer LO3 Energy, of New York, is working on the project with solar and electrical firm Yates Electrical Services, of Paringa, South Australia, a region known for its vineyards, almond and fruit orchards — and incredibly high electricity prices.

The blockchain, perhaps best known as the technology behind the digital currencies Bitcoin and Etherium, is a decentralized ledger that enables and tracks all transactions across a peer-to-peer network. The technology uses encryption to ensure that transactions and data are secure, and provides verification and validation to users.

The technology is still quite new and a variety of companies and organizations are setting up blockchain platforms to carry out simple applications, such as making secure, real-time payments and documenting business transactions.

The Rocky Mountain Institute’s Energy Web Foundation recently launched the first open-source blockchain for the energy sector, called Tobalaba. Big energy companies including Shell, Engie and Tokyo Electric Power Co. are partnering on the effort and using the platform to submit transactions, write smart contracts and/or validate transactions.

Meanwhile, in South Australia, a sharp rise in retail electricity prices, an ample supply of wind and solar power and a frontier, can-do spirit of innovation are fueling the creation of a blockchain energy trading platform that may be similar to Tobalaba, though smaller in scale.

"The intention is to give power and choice back to the customer with what they do with renewable energy, whether it’s battery or solar," said Mark Yates, managing director of Yates Electrical. "The other option is to give them the opportunity to decide what power source they want to buy from."

The intention is to give power and choice back to the customer.

Yates’ company owns 30 solar farms around South Australia, and was hired last year to install electrical equipment on the 100-megawatt battery storage project that Tesla built near Jamestown, South Australia.

Yates said he got the idea for the blockchain energy trading platform after he met LO3 Chief Executive Lawrence Orsini at a conference in Sydney. The two men started discussing how they could work together and eventually put together a deal to build a blockchain platform for South Australia. Now, Yates has 12 companies that have signed up to participate, and he is installing special electric meters that will be used by the digital platform.

LO3, backed by Siemens and other investors, installed a working blockchain solar-power trading platform in Brooklyn, New York, and the company is launching transactive systems that will be part of two community microgrids under development in Germany. The German projects will gauge how easy or hard it is to fit distributed energy and microgrids into existing energy networks, and find out whether consumers want to buy local clean power.

"In Brooklyn, the tech we can use and what we can do with it is limited by state energy regulations, but Australia is more progressive with their vision for a renewables future," Orsini said. "This has made it possible for the South Australia project to include a larger variety of grid services, such as battery storage and demand-side response with IoT devices, which are not currently possible to run in Brooklyn. That's why this is such an exciting project for us."

Australia is more progressive with their vision for a renewables future.

Patrick Broughton, who owns a marketing and design firm in Renmark, South Australia, said he joined the blockchain energy trading project to buy and sell renewable power, get a better price for the excess power that his home solar panels generate than he is currently getting from his power retailer, and save money on his power bills.

Broughton currently pays his power retailer about 40 cents a kilowatt-hour for electricity, but the same retailer pays him just 16 cents a kilowatt-hour for excess electricity that his rooftop panels generate that he doesn’t use. Last year, the retailer paid just 6 cents a kilowatt-hour for the excess solar power.

"What you’re paying for electricity and what you’re selling it for would be much closer, it would bridge that gap," he said. "Ideally, I would like to see heaps of people using LO3 meters, without the need for a retailer. Then you can get rid of that 40 cents and you can agree on a price, you can say, ‘Let’s buy and sell for 25 cents.’ It bypasses the retailer."

What you’re paying for electricity and what you’re selling it for would be much closer.

Australia will have to adopt regulatory changes before businesses and consumers can buy and sell electricity among themselves, without having to go through a retailer, Yates said. Because it is a solar power generator, Yates Electric has a retailer exemption and can sell power to commercial customers. Yates said he is confident policymakers eventually will remove the restrictions on who can sell power.

"That’s when the blockchain will really start to ramp up, because each customer will be responsible for their own meter," he added. "Everyone will have the choice about what to do about their energy."